Correlation Between IAR SA and Compa Sibiu

Can any of the company-specific risk be diversified away by investing in both IAR SA and Compa Sibiu at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IAR SA and Compa Sibiu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IAR SA and Compa Sibiu, you can compare the effects of market volatilities on IAR SA and Compa Sibiu and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IAR SA with a short position of Compa Sibiu. Check out your portfolio center. Please also check ongoing floating volatility patterns of IAR SA and Compa Sibiu.

Diversification Opportunities for IAR SA and Compa Sibiu

0.57

Correlation Coefficient

IAR SA  Compa Sibiu

Very weak diversification

The 3 months correlation between IAR and Compa is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding IAR SA and Compa Sibiu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compa Sibiu and IAR SA is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on IAR SA are associated (or correlated) with Compa Sibiu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compa Sibiu has no effect on the direction of IAR SA i.e., IAR SA and Compa Sibiu go up and down completely randomly.

Pair Corralation between IAR SA and Compa Sibiu

Assuming the 90 days trading horizon IAR SA is expected to generate 0.78 times more return on investment than Compa Sibiu. However, IAR SA is 1.28 times less risky than Compa Sibiu. It trades about -0.04 of its potential returns per unit of risk. Compa Sibiu is currently generating about -0.09 per unit of risk. If you would invest  1,350  in IAR SA on September 4, 2024 and sell it today you would lose (55.00) from holding IAR SA or give up 4.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

IAR SA  vs.  Compa Sibiu

IAR SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IAR SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IAR SA is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Compa Sibiu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compa Sibiu has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with IAR SA and Compa Sibiu

The main advantage of trading using opposite IAR SA and Compa Sibiu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IAR SA position performs unexpectedly, Compa Sibiu can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Compa Sibiu will offset losses from the drop in Compa Sibiu's long position.

The idea behind IAR SA and Compa Sibiu pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.